Quick answer
Market maker: A market maker continuously quotes both a buy and a sell price, earning the spread in return for providing liquidity and absorbing temporary order imbalances.
Also called: liquidity provider
Explained, with an example
The CFTC glossary describes market makers as dealers who buy when there is excess selling and sell when there is excess buying, compensated by quoting a selling price above their buying price; exchanges sometimes pay them to support thin new contracts [1]. In prediction markets the role can be filled by professional traders on an Order book or by a formula (AMM / LMSR).
Frequently asked questions
What is a market maker?
A market maker continuously quotes both a buy and a sell price, earning the spread in return for providing liquidity and absorbing temporary order imbalances.
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Author: Ken Lin · Corrections: if you spot an error, we review it and date-stamp the fix.
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Sources
- CFTC Glossary (binary option, DCM, order book, liquid market, market maker, settlement, wash trading, arbitrage, hedging) — U.S. CFTC, accessed 2 Nov 2026